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Giant Kashagan Finally Starts Production, Watch the Transport

Bottom Line: Thirteen years and $50 billion later, Kazakhstan’s giant Kashagan oil reservoir started pumping on 11 September—but follow the money for the transport, which is where the real game is being played right now.

Analysis: Kashagan is an offshore Caspian Sea reservoir off the coast of western Kazakhstan. Right now, Kazakhstan is producing about 82 million tons of oil and expects to increase that next year to 83 million tons with the first oil from Kashagan. By 2018, the forecast is 110 million tons based on Kashagan production. Kashagan has been phenomenally expensive because the consortium running it has had to build artificial islands and a massive amount of Caspian infrastructure in freezing, shallow waters to make it happen. The multinational consortium North Caspian Oil Company (NCOC) has spent $50 billion so far. The delays have been almost unbearable. The original production start-up was supposed to be 2005. The Kazakh authorities had given the consortium a final deadline of 1 October (moved from June) to have oil pumping or face fines and a loss of partial compensation. The consortium includes Kazakhstan’s state-run KazMunaiGas, Italy’s Eni, ExxonMobil, Shell, and France’s Total—all with 16.81% stakes, along with Japan’s Inpex with 7.56%. While production has started it will still take at least a month to achieve commercial production. Kazakhstan needs about 2 million barrels a day for domestic consumption, so…

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